Starting a Scrap Metal and Recycling Company in Dubai

Dubai sits at the crossing point of Asian, European and African trade lanes, and the container throughput of Jebel Ali Port turns that position into a working advantage for the scrap metal trade. Collecting, sorting and re-exporting ferrous and non-ferrous metals gives a well-structured company a repeatable revenue model rather than a one-off arbitrage.

The sector has also become far more tightly regulated: Dubai's 2024 waste management law and the reverse charge mechanism applied to scrap metal supplies from 2026 changed how licences and invoices must be handled. Choosing the correct licence category, sequencing environmental approvals early and knowing who accounts for VAT will shape both the setup budget and the operational risk.

Table of Contents

• Overview of the Scrap Metal and Recycling Sector in Dubai
• Which Licence Do You Need for a Scrap Metal Company in Dubai?
• Cost of Setting Up a Scrap Metal Company in Dubai (Table)
• Main Scrap Categories Traded in Dubai (Table)
• Tax and Regulatory Framework: Corporate Tax, VAT and Environmental Permits
• Step-by-Step Company Formation Process
• Free Zones Suitable for Scrap and Recycling Activities
• Common Mistakes During Setup
• Sources

Overview of the Scrap Metal and Recycling Sector in Dubai

Scrap metal trading in the UAE rests on two pillars: the volume generated by construction and infrastructure activity, and an export-oriented redistribution network. Material collected locally is sorted and baled in Dubai, then shipped to smelters across the Indian subcontinent, the Far East and the Eastern Mediterranean. The UAE Circular Economy Policy 2021-2031 and the Net Zero 2050 commitment are the two policy frameworks that keep structural demand for recovered raw material rising.

What Is Driving Growth

• Re-export model: Customs treatment on shipments dispatched from a free zone feeds directly into margin.
• Port capacity: Jebel Ali Port and Al Maktoum International Airport allow flexibility across bulk and containerised cargo.
• Regulatory clarity: Because waste transport, treatment and disposal now sit under a municipal permit regime, informal competition is narrowing.
• Industrial demand: Steel and aluminium producers increasingly favour secondary raw material, which consumes markedly less energy than primary production.

Environmental and Economic Contribution

Remelting scrap uses far less energy and water than producing metal from ore, and cuts both greenhouse gas emissions and mining waste. On the commercial side, recovered metal acts as a buffer against raw material price swings for manufacturers. That dual benefit turns scrap trading into a permanent link in the industrial supply chain rather than a pure brokerage business.

Which Licence Do You Need for a Scrap Metal Company in Dubai?

The licence category follows what the business physically does. If the operation is limited to buying, selling and shipping, a scrap metal trading licence is sufficient. Cutting, baling, smelting or sorting requires a recycling or industrial licence. On the mainland the issuing authority is the Department of Economy and Tourism (DET); inside a free zone it is the relevant zone authority. Waste collection, transport and treatment additionally fall under Dubai Municipality, while cross-border movements of hazardous waste involve the Ministry of Climate Change and Environment (MOCCAE).

Activity Codes and Competent Authorities

Wholesale trade in metal scrap sits within the wholesale group of the UAE activity classification (metal waste and scrap wholesale under ISIC 4669). Selecting the correct activity code at application stage matters well beyond the licence itself: it determines customs declarations, bank account onboarding and VAT treatment later on. An inaccurate code creates mismatches in export documentation and triggers additional approval requests.

Free Zone or Mainland?

This is a customer-profile decision, not only a cost decision. A supplier selling directly into the UAE domestic market is usually better served by a mainland licence, while an import, processing and re-export operation tends to be more efficient in a free zone. A detailed comparison is available in our guide on mainland versus free zone company formation in Dubai.

Cost of Setting Up a Scrap Metal Company in Dubai

The setup budget moves with the choice of jurisdiction, licence type, visa quota and storage requirement. The ranges below are indicative figures commonly seen in the market; binding amounts should be taken from the current tariff of the relevant free zone authority or DET. Yard and warehouse costs should be assessed separately, and our overview of warehouse rental in Dubai is a useful starting point.

Main Scrap Categories Traded in Dubai

The scrap groups the company intends to handle must be defined at application stage, because categories classified as hazardous waste require additional approval.

Tax and Regulatory Framework: Corporate Tax, VAT and Environmental Permits

Corporate Tax and QFZP Status

UAE corporate tax applies to financial years beginning on or after 1 June 2023: 0% on taxable income up to AED 375,000 and 9% above that threshold. Free zone companies can access the 0% rate on qualifying income as long as they satisfy the Qualifying Free Zone Person (QFZP) conditions. QFZP status is not automatic; it requires adequate substance in the free zone, audited financial statements, transfer pricing compliance and non-qualifying revenue that stays within the de minimis limit. Our detailed guide on QFZP status and the 0% corporate tax rate covers the conditions in full.

One point matters specifically for scrap traders: distribution of goods from a free zone counts as qualifying income only where the goods are distributed in or from a Designated Zone and the buyer resells or processes them. Sales to an end consumer fall outside that scope. Separately, UAE subsidiaries of multinational groups with consolidated annual revenue above EUR 750 million fall within the 15% Domestic Minimum Top-up Tax for financial years starting on or after 1 January 2025.

VAT and the Reverse Charge Mechanism on Scrap Metal

The standard VAT rate in the UAE is 5%. Registration is mandatory for businesses whose annual taxable supplies and imports exceed AED 375,000, and voluntary above AED 187,500.

A 2025 Cabinet Decision introduced a change that goes to the core of this sector: supplies of scrap metal between VAT-registered persons in the UAE are subject to the reverse charge mechanism. The supplier does not charge VAT on the invoice; the obligation to account for and pay the tax shifts to the recipient. For the mechanism to apply, the recipient must be VAT registered, must confirm in a written declaration that the material is for resale or processing, and the supplier must retain that declaration and state on the invoice that the reverse charge applies.

Environmental Legislation and Municipal Permits

Waste management activities in Dubai are governed by Law No. 18 of 2024. It requires a Dubai Municipality permit for the collection, transport, treatment, recovery and disposal of waste, obliges waste producers to keep records, and provides for administrative sanctions in case of breach. Authorisation of transport vehicles and labelling of hazardous waste sit within the same framework. Our municipal and ministry permit services shorten this stage considerably.

Step-by-Step Company Formation Process

With complete documentation the process typically closes within 5 to 10 working days; projects involving an industrial facility and environmental approval take longer.

Documents Required

• Passport copies and photographs of all shareholders and directors
• Trade name reservation certificate and initial approval letter
• A short business plan describing the intended activity
• Lease agreement (Ejari or free zone allocation certificate)
• No Objection Certificate where a shareholder is already a UAE resident
• Equipment list and facility layout for processing activities

Export and Logistics Design

In scrap trading the margin usually hides in shipment planning. Container fill rate, port handling charges and certificates of origin all feed directly into profit per tonne. When designing the export side it is worth reading our guides on import and export company structures in Dubai and logistics company formation together.

Free Zones Suitable for Scrap and Recycling Activities

Not every free zone permits scrap and waste activities; the ones that do generally offer industrial plots, open yard space and heavy vehicle access. Port-linked zones suit an import and re-export model, while industrially oriented zones are a better fit for processing and baling. Before applying, confirm the visa quota, the minimum warehouse area and whether scrap actually appears on the zone's approved activity list. Our overview of Dubai free zones compares the main options.

Common Mistakes During Setup

• Wrong activity code: Processing under a trading licence is treated as operating outside the licensed scope during inspection.
• Leaving environmental approval to the end: A permit refused after the facility is leased turns the rent into a sunk cost.
• Not collecting the reverse charge declaration: Without a written declaration from the buyer, the VAT exposure can stay with the seller.
• Assuming QFZP status: Being established in a free zone does not on its own secure the 0% rate.
• Undersizing the yard: Scrap is bulky; insufficient space disrupts both shipment planning and cost per tonne.

Why Choosing the Right License Matters

In scrap metal operations, license selection is decisive for both legal compliance and operational flexibility. A trade license may suffice for buy-and-sell businesses, while companies performing cutting, sorting, melting or recovery need an industrial or recycling license and related environmental approvals. The wrong license type can lead to activity restrictions and extra costs later. Therefore, clarifying the intended scope of activity at the start of the business plan and selecting the appropriate license is essential.

Advantages That Set Dubai Apart

• Strategic location: A key trade point between Asia, Europe and Africa.
• Advanced logistics: Jebel Ali Port and strong road connections.
• Investor-friendly regulation: 100% foreign ownership and incentives in free zones.
• Sustainability vision: Government support for the circular economy.

Tips for Sustainable Growth

To stand out in this increasingly competitive market, conducting thorough market analysis, building a reliable supplier network, and planning an appropriately scaled facility in the right location are critical success factors. Focusing on high-value segments such as non-ferrous metals and electronic waste can improve profit margins. Timely tax registrations and regular accounting processes support both legal compliance and sustainable growth.

If you would like professional support with setup, licensing, tax registration and bank account processes, you can reach us via our contact page or quickly request a quote.

Sources

• UAE Official Government Portal - Corporate Tax (u.ae)
• Federal Tax Authority - tax.gov.ae
• UAE Ministry of Finance - Cabinet resolution on the VAT reverse charge for scrap metal trading
• Government of Dubai - Law No. 18 of 2024 Regulating Waste Management
• UAE Circular Economy Policy 2021-2031 (u.ae)
• Dubai Municipality - Waste Department